EPA Attempts to Increase Recycling by Redefining Solid Waste

Posted on December 31, 2008 by Karen Aldridge Crawford

73 Fed. Reg. 64668 (Oct. 30, 2008) to be codified at 40 C.F.R. 260-261

 

On October 30, 2008, the EPA revised the definition of solid waste to exclude certain recycled materials under RCRA. The purpose behind this change is twofold: first is to respond to a series of decisions by the U.S. Court of Appeals for the DC Circuit and second is to clarify the RCRA concept of "legitimate recycling."   The EPA estimates that 5600 facilities in 280 industries in 21 economic sectors may be affected by this revision and expects that the revision will encourage recycling of additional hazardous secondary materials. Exclusion of certain hazardous secondary materials from the definition based on how they are reclaimed should result in resource conservation, as well as cost savings to those who engage in beneficial recycling/reclamation in accord with the new rules.

 

Under the new rule, hazardous secondary materials that are legitimately reclaimed may be excluded from regulation as hazardous waste. The new rule excludes certain hazardous secondary materials, such as RCRA-listed sludges, listed by-products, and spent materials that are generated and legitimately reclaimed under the control of the generator. Only those hazardous secondary materials that are handled in non-land based units, e.g., tanks, containers, or containment buildings, are excluded. This exclusion does not apply to hazardous secondary materials that are inherently waste-like, that are used in a manner constituting disposal or used to produce products that are applied to or placed on the land, or that are burned to recover energy or used to produce a fuel or are otherwise contained in fuels. The following activities fall within the exclusion: recycling on-site at the generating facility, recycling off-site within the same company, and recycling through a tolling agreement. Additionally, the rule contains a petition procedure for a generator to obtain a non-waste determination that its recycled hazardous secondary material is not discarded, making it exempt from hazardous secondary materials regulation. Intermediate facilities and recyclers/reclaimers also must comply with provisions of the rule to receive and recycle/reclaim exempt hazardous secondary materials and must meet the financial assurance requirements. Generators who ship to such intermediate facilities or recyclers/reclaimers must make "reasonable efforts", as defined by the new rules, to ensure proper management and legitimate recycling of the exempt materials prior to shipping, and must document their investigatory efforts addressing specific issues defined in the new rules.

 

To be excluded from hazardous secondary materials regulation, the recycling of the hazardous secondary material must be legitimate. Legitimacy of the recycling relies on the following mandatory factors: (1) the hazardous secondary material provides a useful contribution to the recycling process or product and (2) the recycling process produces a valuable product or intermediate. The EPA will also consider two other factors, which are not mandatory: (1) the hazardous secondary material should be managed as a valuable commodity and (2) the final product of the recycling cannot contain significantly higher levels of hazardous constituents than are in analogous products.

 

The EPA received hundreds of comments on the long-awaited new rule (first proposed five years earlier), raising multiple issues, including the scope of the new rule and whether the EPA had the legal authority to make these changes. In particular, the EPA received many comments from environmental groups and the waste treatment and recycling industry regarding the EPA's authority to define when recyclable hazardous secondary materials are solid wastes and how. Other commenters argued that the EPA needed stronger conditions to protect human health and the environment before it could lawfully claim that excluded materials are not discarded. Additionally, the hazardous waste generating industry disputed the EPA's authority to promulgate the new rule, arguing that the EPA has no authority to regulate such recycling. 

 

The EPA also received extensive comments requesting that the scope of the rule be expanded to include hazardous secondary materials used in a manner constituting disposal and hazardous secondary materials burned for energy recovery. The EPA maintains, however, that these are outside the scope of the solid waste exclusion's focus on reclamation. 

 

Additionally, most states, the environmental community, and the waste management industry argued that all four of the legitimacy factors should be mandatory requirements for a recycling activity to be considered legitimate recycling. Industry, however, had some commenters who supported the proposed structure and others who preferred that the factors be balancing factors. The EPA compromised between the two approaches, instituting two mandatory requirements and two non-mandatory factors.

 

The revised "solid waste" definition provides opportunities to recycle hazardous secondary materials but also includes many details that regulated industries will need to be aware of and implement to ensure their recycling of hazardous secondary materials falls within the newly crafted exception to hazardous secondary materials regulation.

Can Clean Energy Save America?

Posted on December 29, 2008 by Christopher Davis

America, and our new President, face a daunting array of challenges as we close out 2008 and enter the New Year. These include a general economic meltdown, widespread job losses, a collapsing auto industry, unsustainable dependence on foreign oil, climate change and a protracted war in Iraq, among others. Many of these problems relate directly or indirectly to our production and consumption of energy.

The initial focus of the incoming Obama administration is rapid deployment of a massive economic recovery package. Early indications, including the President-elect’s post-election statements and his cabinet-level appointments, suggest that “green jobs” and “green infrastructure” are likely to play a prominent role in Mr. Obama’s efforts to restart the U.S. economy, as reflected in the Presidential transition website.  A number of commentators have talked of a “Green New Deal” as the key to revitalizing our economy. They may just be right.

 

From 2003 through the third quarter of 2008, private U.S. investment in “clean technologies” (mostly alternative energy-related) surged, totaling about $2.5 billion in 2007 and at least $3 billion in the first three quarters of 2008. However, due primarily to the credit crunch and unavailability of project financing for capital-intensive renewables projects such as wind farms, such investment sagged substantially in the fourth quarter. Despite considerable investor interest, many renewable energy projects have been put on hold. This is bad for both the economy and the environment.

There is much that the federal -- and state -- governments can do to help stimulate investment in clean energy, using both carrots (subsidies) and sticks (regulatory mandates). On the subsidy side, government loans or loan guarantees could do much to ease the credit crunch and facilitate the financing of renewables projects. Other tools include expanding tax credits, governmental procurement of renewable energy, increased federal research and development grants for clean energy technologies, etc. Potential mandates include a federal renewable portfolio standard for electric utilities, increased auto fuel efficiency standards, stronger building and appliance efficiency standards and regulation of greenhouse gas emissions via EPA rule or cap-and trade climate change legislation. Such measures could materially improve the economics of alternative energy production and boost efficient energy use.

Governmental and private sector investment in renewable energy and other “clean technologies – including wind, solar, geothermal and tidal power; advanced biofuels, “smart-grid” development, equipment efficiency, energy storage, green buildings, electric cars and “clean coal” technology – can do much to reinvigorate our economy, increase our energy security and reduce our greenhouse gas emissions. Such investment can also help to jump-start American innovation and entrepreneurship, reinvent our declining manufacturing sector, and improve our balance of payments through reduced oil imports and clean technology exports. Moreover, policies that promote sustainable energy production and consumption can help create a shared sense of national purpose to which everyone can contribute.

So can clean energy save America? We may soon get a chance to find out.

Can Clean Energy Save America?

Posted on December 29, 2008 by Christopher Davis

America, and our new President, face a daunting array of challenges as we close out 2008 and enter the New Year. These include a general economic meltdown, widespread job losses, a collapsing auto industry, unsustainable dependence on foreign oil, climate change and a protracted war in Iraq, among others. Many of these problems relate directly or indirectly to our production and consumption of energy.

The initial focus of the incoming Obama administration is rapid deployment of a massive economic recovery package. Early indications, including the President-elect’s post-election statements and his cabinet-level appointments, suggest that “green jobs” and “green infrastructure” are likely to play a prominent role in Mr. Obama’s efforts to restart the U.S. economy, as reflected in the Presidential transition website.  A number of commentators have talked of a “Green New Deal” as the key to revitalizing our economy. They may just be right.

 

From 2003 through the third quarter of 2008, private U.S. investment in “clean technologies” (mostly alternative energy-related) surged, totaling about $2.5 billion in 2007 and at least $3 billion in the first three quarters of 2008. However, due primarily to the credit crunch and unavailability of project financing for capital-intensive renewables projects such as wind farms, such investment sagged substantially in the fourth quarter. Despite considerable investor interest, many renewable energy projects have been put on hold. This is bad for both the economy and the environment.

There is much that the federal -- and state -- governments can do to help stimulate investment in clean energy, using both carrots (subsidies) and sticks (regulatory mandates). On the subsidy side, government loans or loan guarantees could do much to ease the credit crunch and facilitate the financing of renewables projects. Other tools include expanding tax credits, governmental procurement of renewable energy, increased federal research and development grants for clean energy technologies, etc. Potential mandates include a federal renewable portfolio standard for electric utilities, increased auto fuel efficiency standards, stronger building and appliance efficiency standards and regulation of greenhouse gas emissions via EPA rule or cap-and trade climate change legislation. Such measures could materially improve the economics of alternative energy production and boost efficient energy use.

Governmental and private sector investment in renewable energy and other “clean technologies – including wind, solar, geothermal and tidal power; advanced biofuels, “smart-grid” development, equipment efficiency, energy storage, green buildings, electric cars and “clean coal” technology – can do much to reinvigorate our economy, increase our energy security and reduce our greenhouse gas emissions. Such investment can also help to jump-start American innovation and entrepreneurship, reinvent our declining manufacturing sector, and improve our balance of payments through reduced oil imports and clean technology exports. Moreover, policies that promote sustainable energy production and consumption can help create a shared sense of national purpose to which everyone can contribute.

So can clean energy save America? We may soon get a chance to find out.

UPDATE ON NAAQS OZONE LITIGATION

Posted on December 18, 2008 by John Crawford

On March 27, 2008, the Environmental Protection Agency (EPA) announced the final Ozone NAAQS Rule which requires airborne concentrations of ozone to be lowered from 80 ppb (actually 84 ppb due to rounding allowances) to 75 ppb for both primary and secondary standards. Industrial and manufacturing groups balked at the more stringent standard, claiming it was unnecessary and would place an undue hindrance on economic development. In opposition to this viewpoint, environmental groups contend that the new standard fails to adequately protect human health and the environment and that the standard should be lower.

 

Not surprisingly, due to the contrasting views, the standard was challenged. Asserting that the Ozone NAAQS Rule was too stringent, the State of Mississippi filed a Petition for Review,  in Mississippi v. EPA, No. 08-1200 (D.C. Cir., filed May 23, 2008). Shortly thereafter, the Missouri Department of Natural Resources and a number of trade/industrial groups intervened on behalf of Mississippi. Environmental groups, led by the American Lung Association, Appalachian Mountain Club and Natural Resources Defense Council, also filed a challenge to the ozone standard in American Lung Association v. EPA, No. 08-1203 (D.C. Cir.) which was later consolidated with the Mississippi case.

 

The various arguments, both for and against the standard, have not yet been briefed. In fact, Harold Pizzetta, lead attorney for the State of Mississippi, has stated that the two sides have yet to come to an agreement on a briefing schedule, leading one to conclude that there is likely very little the two camps will agree on.  

 

The question as to why Mississippi led the charge/challenge against the new ozone standard is an interesting one. While current data suggest the new standard will have direct impacts on only 13 of Mississippi’s 82 counties, the counties impacted are among the leaders in the state’s economy. Among those Mississippi counties that would not meet the 75 ppb standard are DeSoto County, the state’s and one of the nation’s fast growing counties, and Jackson County, home to the state’s largest employer and numerous other manufacturing facilities. Mr. Pizzetta believes the cost of compliance with the standard – while specifically not a factor the Court may consider – provides justification for the state’s challenge.  Additionally, Pizzetta stated that scientific evidence suggests that the data used by EPA in setting the standard was flawed.   Moreover, Mississippi’s leaders believe the 75 ppb standard will be met in the short term if the Clean Air Interstate Rule (CAIR) is implemented. To that end, the state has joined with some of the same groups and entities that it opposes in the ozone litigation and requested that the D.C. Circuit stay the vacatur of CAIR.   

 

In opposition to Mississippi’s argument, the environmental groups will likely point to the work by the Clean Air Scientific Advisory Committee (CASAC) which recommended that the primary ozone standard be set within the range of 60 – 70 ppb.   In addition, it’s believed that EPA originally sought to set the standard within this range and was overruled by the White House.   Thus, EPA is left in a precarious situation in that the agency must justify why its standard is neither too strict nor too lenient.   The current view by a number of environmental litigators is that the current litigation will be decided on the scientific evidence and not on a constitutional argument, as the 1997 ozone NAAQS litigation was in the American Trucking case.

 

In regard to the actual timeframes for action set forth in the ozone rule, states must make initial designations of attainment/non-attainment by March 2009, with EPA making final designations by March 2010. Thereafter, State Implementation Plans (SIPs) must be submitted to EPA by 2013, with attainment to be achieved between 2014 and 2030, depending on severity. Based on the movement of the existing litigation, it’s doubtful a decision will be made prior to the time period set for final designations. Additionally, litigants do not believe the court will enter a stay of the new rule. 

 

As a result, states will be left with no choice but to make designations in conformity with the 75 ppb standard.

 

Article written by:   

            Gary Rikard

            Michael Caples

            Butler, Snow, O’Mara, Stevens & Cannada, PLLC

            P.O. Box 22567
            Jackson, MS 39225-2567

UPDATE ON NAAQS OZONE LITIGATION

Posted on December 18, 2008 by John Crawford

On March 27, 2008, the Environmental Protection Agency (EPA) announced the final Ozone NAAQS Rule which requires airborne concentrations of ozone to be lowered from 80 ppb (actually 84 ppb due to rounding allowances) to 75 ppb for both primary and secondary standards. Industrial and manufacturing groups balked at the more stringent standard, claiming it was unnecessary and would place an undue hindrance on economic development. In opposition to this viewpoint, environmental groups contend that the new standard fails to adequately protect human health and the environment and that the standard should be lower.

 

Not surprisingly, due to the contrasting views, the standard was challenged. Asserting that the Ozone NAAQS Rule was too stringent, the State of Mississippi filed a Petition for Review,  in Mississippi v. EPA, No. 08-1200 (D.C. Cir., filed May 23, 2008). Shortly thereafter, the Missouri Department of Natural Resources and a number of trade/industrial groups intervened on behalf of Mississippi. Environmental groups, led by the American Lung Association, Appalachian Mountain Club and Natural Resources Defense Council, also filed a challenge to the ozone standard in American Lung Association v. EPA, No. 08-1203 (D.C. Cir.) which was later consolidated with the Mississippi case.

 

The various arguments, both for and against the standard, have not yet been briefed. In fact, Harold Pizzetta, lead attorney for the State of Mississippi, has stated that the two sides have yet to come to an agreement on a briefing schedule, leading one to conclude that there is likely very little the two camps will agree on.  

 

The question as to why Mississippi led the charge/challenge against the new ozone standard is an interesting one. While current data suggest the new standard will have direct impacts on only 13 of Mississippi’s 82 counties, the counties impacted are among the leaders in the state’s economy. Among those Mississippi counties that would not meet the 75 ppb standard are DeSoto County, the state’s and one of the nation’s fast growing counties, and Jackson County, home to the state’s largest employer and numerous other manufacturing facilities. Mr. Pizzetta believes the cost of compliance with the standard – while specifically not a factor the Court may consider – provides justification for the state’s challenge.  Additionally, Pizzetta stated that scientific evidence suggests that the data used by EPA in setting the standard was flawed.   Moreover, Mississippi’s leaders believe the 75 ppb standard will be met in the short term if the Clean Air Interstate Rule (CAIR) is implemented. To that end, the state has joined with some of the same groups and entities that it opposes in the ozone litigation and requested that the D.C. Circuit stay the vacatur of CAIR.   

 

In opposition to Mississippi’s argument, the environmental groups will likely point to the work by the Clean Air Scientific Advisory Committee (CASAC) which recommended that the primary ozone standard be set within the range of 60 – 70 ppb.   In addition, it’s believed that EPA originally sought to set the standard within this range and was overruled by the White House.   Thus, EPA is left in a precarious situation in that the agency must justify why its standard is neither too strict nor too lenient.   The current view by a number of environmental litigators is that the current litigation will be decided on the scientific evidence and not on a constitutional argument, as the 1997 ozone NAAQS litigation was in the American Trucking case.

 

In regard to the actual timeframes for action set forth in the ozone rule, states must make initial designations of attainment/non-attainment by March 2009, with EPA making final designations by March 2010. Thereafter, State Implementation Plans (SIPs) must be submitted to EPA by 2013, with attainment to be achieved between 2014 and 2030, depending on severity. Based on the movement of the existing litigation, it’s doubtful a decision will be made prior to the time period set for final designations. Additionally, litigants do not believe the court will enter a stay of the new rule. 

 

As a result, states will be left with no choice but to make designations in conformity with the 75 ppb standard.

 

Article written by:   

            Gary Rikard

            Michael Caples

            Butler, Snow, O’Mara, Stevens & Cannada, PLLC

            P.O. Box 22567
            Jackson, MS 39225-2567

What to Watch in 2009: Carbon Credits Are a Hot "Commodity"

Posted on December 16, 2008 by Michèle Corash

2009 promises a fascinating year, in which carbon emissions – the newest environmental commodity – will continue to influence both world markets and world politics. The performance of the carbon market, and the emergence of new regulatory schemes to cap carbon, particularly in the U.S., is sure to be closely watched by many politicians, environmentalists, and players in the burgeoning carbon trading industry. While the carbon market’s outlook is healthy, how the U.S. enters it – whether it can find the political will for a national cap-and-trade system, and ensure that carbon emissions receive favorable domestic tax treatment – could mean the difference between the limelight or a bit part for the global carbon show.

 

Carbon emissions markets: strong value, strong growth

 

Despite the global economic tumult, recent reports by carbon market watchers such as New Carbon Finance[1] predict that the total value of carbon market trades will reach $116 billion by the end of 2008. This reflects a rise in both the volume of carbon emissions transacted (expected to grow 31% in 2008), and the value of carbon emission credits (projected to rise by 80% this year). What’s more, the carbon market compares well to other commodity markets: private investments in carbon funds represented 3.2% of all private commodity investments at the end of 2007.

 

The continued growth in value is linked to high prices for the two basic types of carbon commodities: European Union Allowances (EUAs), and Certified Emission Reductions (CERs). EUAs are the basic carbon emission unit currently traded in the European Union’s Emissions Trading System (EU ETS). EUAs account for 79% of all carbon trades, and their value has averaged $34 per ton through 2008.[2] For their part, CER trades represent 17% of the transacted value in the carbon market through October 2008.   

 

Momentum building in the United States for federal cap and trade

 

The widely anticipated initiation of a federal cap and trade system in the U.S., as has been openly called for by the incoming Obama administration, as well as many business and industry leaders, is expected to increase the volume and value of the carbon market exponentially. With the entry of the U.S., the global market could top $3 trillion by 2020. The strength of cap-and-trade, though, lies in its design, and the features built into a U.S. program in the coming months will be driven as much by recession-era politics as by tested economics and sound science.

 

Nevertheless, Obama’s environmental appointments are already writing “cap and trade” on the wall. Lisa Jackson, picked by President-elect Obama to head the Environmental Protection Agency, is board vice-president of the Regional Greenhouse Gas Initiative,[3] a consortium of ten states whose mandatory cap and trade system will hold its second allowances auction[4] on December 17, 2008. Within the White House itself, Carol Browner, an advocate of regulating carbon emissions who headed the EPA during the Clinton administration, is returning to a top federal environmental job with her appointment as Obama’s “climate czar.” 

 

Meanwhile, it may be up to Steven Chu,[5] Nobel prize-winning director of the Lawrence Berkeley National Laboratory and energy secretary nominee, to build bridges between climate scientists and those (including a sizable minority of members of Congress) who still believe that climate change is mostly a theory. Chu is being hailed[6] as a scientist, rather than a political appointee, in a position that could deeply affect the U.S.’s transition to a less carbon-intensive economy. Chu may use his position to subsidize more practically-applicable research into alternative energy forms. But at least as important will be his role in the politics of addressing climate change, where skepticism, fear of adverse economic impacts, and firmly rooted consumption habits are major challenges.

 

Where there is potential for profit, there is also potential for taxes

 

Without a carbon cap and trade program in place, questions still revolve around the nature of this new “commodity” and how it will be treated under the law. Considering the only certainties are death and taxes, it is safe to assume that even carbon credits will receive a visit from the tax man. So far, no statutory provisions or IRS authority have yet issued on the federal income tax treatment of the carbon credits. Gain or loss from the sale of the carbon credits, and amounts spent to acquire the carbon credits, is as yet undefined for federal income tax purposes.

Some predictions are possible, though. Under the sulfur dioxide emissions trading program[7] of the 1990 Clean Air Act, the IRS ruled[8] that the allocation of sulfur dioxide emissions credits do not result in gross income to electric utilities when issued. More recently, the IRS addressed the federal income tax treatment of gain from the sale of excess foreign carbon credits granted under the EU ETS. A June 2008 ruling held that because they were intangible property used in the foreign corporation's trade or business, gain from the sale of surplus carbon credits did not constitute “foreign personal holding company income” for purposes of the “controlled foreign corporation” rules of the Internal Revenue Code [9].  Apart from the caveat that the features of a federal program in the U.S. may differ from the EU ETS, this strongly suggests that carbon credits under a cap and trade program may be treated as intangible assets, giving rise to capital gain or loss rather than ordinary income or loss. If the projected trillion dollar market is realized, then the potential tax revenue will be, needless to say, worth watching.

With the specter of a multi-trillion dollar market, an ideological reversal in Washington, and the expiration of the Kyoto Protocol on the horizon, this new carbon commodity inevitably will become ensnared in the continuing debates over economic recovery. Regardless of the science, greenhouse gases will undoubtedly have an impact on 2009. 

 

This article was written by William Sloan and Rachel Peterson of Morrison & Foerster LLP's Cleantech practice group.

 


[1] Research by New Carbon Finance, at http://www.newcarbonfinance.com/.

[2] One EUA represents one ton of carbon dioxide-equivalent emissions; each of the 12,000 facilities that fall within the cap and trade system has been assigned an emissions cap, and must submit that number of allowances by the end of 2012. At the market’s most basic level, facilities whose emissions exceed the cap are trying to buy EUAs, and those whose emissions fall below it have EUAs to sell.

[8] Revenue Ruling 92-16, 1992-1 C.B. 13; see also Revenue Procedure 92-91, 1992-2 C.B. 503.

[9] Private Letter Ruling 200825009 (June 20, 2008).

 

2009 Annual Meeting - SAVE THE DATE!

Posted on December 15, 2008 by Rachael Bunday

The American College of Environmental Lawyers is planning its 2009 Annual Meeting for October 1-3 in Portland, Maine. A majority of the conference will be held at the Portland Regency Hotel (www.theregency.com). More information and an agenda to follow at a later date.

THE ROLE OF RENEWABLE ENERGY IN THE REDUCTION OF GREENHOUSE GASES

Posted on December 5, 2008 by Linda Bullen

Despite some early skepticism, the concept that carbon dioxide and other greenhouse gases contribute to global warming is now a widespread, if not universally accepted, belief. This link was acknowledged by the U.S. Supreme Court in Massachusetts v. Environmental Protection Agency, 127 S.Ct. 1438, 1446 (2007). With the recognition of this relationship has come an increased awareness of the role that traditional energy production facilities have played in global warming, which, in turn, has resulted in an increased interest in the development of renewable energy. 

 

            Renewable energy is energy which, by definition, is naturally replenished. The most commonly recognized forms of renewable energy are sunlight, wind, geothermal, water and biofuel/biomass sources. While lawmakers throughout the U.S. have passed legislation requiring that a percentage of electricity must be derived from renewable resources, the state of Nevada has been a leader in mandating that renewable energy be a made a significant part of electric provider's portfolios. In 1997, Nevada’s legislature passed into law in the state’s first “Renewable Portfolio Standard” which required that electric providers in the state acquire renewable electric generation or purchase renewable energy credits so that each utility had 1 percent of total consumption in renewables. In 2001, the standard was modified to require that, by the year 2013, 15 percent of electricity be derived from renewables.

 

            While renewable energy facilities are generally environmentally preferable to their fossil-fuel counterparts, they are not without their impacts to both the human and natural environments. For example, renewable energy sources are often less concentrated than fossil fuels, thereby requiring a significantly larger geographic footprint for renewable energy facilities. In addition, certain types of renewables have significant visual impact, and some renewable projects utilize other, sometimes precious, resources such as water.

 

            These impacts are, in the case of most large scale electrical generation projects, analyzed in the course of the environmental review process mandated by the National Environmental Policy Act (“NEPA”). NEPA requires not only analysis of the environmental impacts of proposed projects when such projects have a federal nexus and are deemed to have a significant impact on the environment, but also requires mitigation of such impacts or rejection of projects where the environmental impact is significant and cannot be adequately mitigated. 

 

            Development of renewable energy projects requires careful examination of science, law and public policy to ensure compliance with all applicable legal requirements and protection of the environment. The process is lengthy, costly, and at times contentious, but each completed project brings us closer to meeting the nation's energy needs without contributing to global warming.

Environmental Appeals Board Tees Up Carbon Dioxide Issue to Obama Administration

Posted on December 4, 2008 by Stephen M. Bruckner

In a decision that will have far-reaching implications for coal-fired power plants, EPA's Environmental Appeals Board ("EAB") ruled on November 14, 2008 that EPA's Region 8 must reconsider whether carbon dioxide ("CO2") is a regulated air pollutant covered by the Clear Air Act's Prevention of Significant Deterioration ("PSD") permitting program. Because there is so little time left for EPA to finalize its decision, the EAB's ruling effectively drops this hot button issue squarely on the doorstep of the incoming Obama administration.

 

            The procedural posture of this case is a bit unusual. Deseret Power Electric Cooperative ("Deseret") operates a coal-fired power plant, the Bonanza Power Plant, on the Uintah and Ourah Indian Reservation in Utah. Deseret wants to build a new waste-coal-fired plant at the same location. The new plant needs a "PSD permit" to regulate its emissions under the Clean Air Act. A PSD permit requires the installation of "Best Available Control Technology", or "BACT", for regulated pollutants.

 

            Most PSD permits are issued by state environmental agencies. However, because Deseret's power plant is located on an Indian reservation, EPA's Region 8 is the permitting authority. EPA issued the PSD permit to Deseret on August 30, 2007. The Sierra Club, which had submitted comments to EPA on the proposed permit, appealed the permitting decision to the Environmental Appeals Board. Sierra Club argued that the permit violated the Clean Air Act because the Act requires BACT for each pollutant "subject to regulation" under the Act. [Clean Air Act §§ 165(a)(4), 168(3); 42 U.S.C. §§ 7475(a)(4), 7478(3)].

 

            The EAB rejected the Sierra Club's argument. The EAB carefully reviewed the Supreme Court's landmark decision in Massachusetts v. EPA, 549 U.S. 497 (2007), which held that CO2 is within the Clean Air Act's definition of "air pollutant". The EAB noted that the Massachusetts decision did not address whether carbon dioxide is a pollutant "subject to regulation" under the Clean Air Act. The EAB therefore rejected the Sierra Club's argument that the phrase "subject to regulation" has a plain meaning that requires Region 8 to establish a CO2 limit in Deseret's permit.

 

            But that was pretty much the end of the good news for EPA and Deseret. In making its permit decision on CO2, EPA Region 8 relied on prior EPA interpretations addressing when a pollutant is considered to be "regulated". The EAB ruled that the reasons cited by Region 8 for its decision were not sufficient. The EAB then sent the case back to Region 8 to 'reconsider whether or not to impose a CO2 BACT limit in light of the Agency's discretion to interpret, consistent with the CAA [Clean Air Act], what constitutes a "pollutant subject to regulation under the Act."' [Deseret decision at p. 63]. Recognizing the potential impact of its ruling and of Region 8's further consideration, the EAB observed that because the issue "has implications far beyond this individual permitting proceeding", Region 8 should decide whether it would be better to address the matter in "an action of nationwide scope". [Deseret decision, pp. 63-64].

 

            Clearly, then, the Sierra Club was denied the clear victory it sought; namely, to require BACT for carbon dioxide in all coal-fired power plant PSD permits. On the other hand, Deseret and other electric utilities seeking PSD permits are left hanging as to whether CO2 will be a regulated pollutant under the PSD program. Although EPA probably wants to resolve this case before the expiration of President Bush's term, as a practical matter, it simply cannot get it done in little more than a month. Thus, the incoming Administration must squarely confront an issue that could shape the climate change debate and, ultimately, energy policy in this country. EPA most likely will take the hint from the EAB and handle the matter through "an action of nationwide scope". How it turns out is anyone's guess, but it is fair to say that the new EPA will have more climate change hawks in policy positions than the current Agency.

Environmental Appeals Board Tees Up Carbon Dioxide Issue to Obama Administration

Posted on December 4, 2008 by Stephen M. Bruckner

In a decision that will have far-reaching implications for coal-fired power plants, EPA's Environmental Appeals Board ("EAB") ruled on November 14, 2008 that EPA's Region 8 must reconsider whether carbon dioxide ("CO2") is a regulated air pollutant covered by the Clear Air Act's Prevention of Significant Deterioration ("PSD") permitting program. Because there is so little time left for EPA to finalize its decision, the EAB's ruling effectively drops this hot button issue squarely on the doorstep of the incoming Obama administration.

 

            The procedural posture of this case is a bit unusual. Deseret Power Electric Cooperative ("Deseret") operates a coal-fired power plant, the Bonanza Power Plant, on the Uintah and Ourah Indian Reservation in Utah. Deseret wants to build a new waste-coal-fired plant at the same location. The new plant needs a "PSD permit" to regulate its emissions under the Clean Air Act. A PSD permit requires the installation of "Best Available Control Technology", or "BACT", for regulated pollutants.

 

            Most PSD permits are issued by state environmental agencies. However, because Deseret's power plant is located on an Indian reservation, EPA's Region 8 is the permitting authority. EPA issued the PSD permit to Deseret on August 30, 2007. The Sierra Club, which had submitted comments to EPA on the proposed permit, appealed the permitting decision to the Environmental Appeals Board. Sierra Club argued that the permit violated the Clean Air Act because the Act requires BACT for each pollutant "subject to regulation" under the Act. [Clean Air Act §§ 165(a)(4), 168(3); 42 U.S.C. §§ 7475(a)(4), 7478(3)].

 

            The EAB rejected the Sierra Club's argument. The EAB carefully reviewed the Supreme Court's landmark decision in Massachusetts v. EPA, 549 U.S. 497 (2007), which held that CO2 is within the Clean Air Act's definition of "air pollutant". The EAB noted that the Massachusetts decision did not address whether carbon dioxide is a pollutant "subject to regulation" under the Clean Air Act. The EAB therefore rejected the Sierra Club's argument that the phrase "subject to regulation" has a plain meaning that requires Region 8 to establish a CO2 limit in Deseret's permit.

 

            But that was pretty much the end of the good news for EPA and Deseret. In making its permit decision on CO2, EPA Region 8 relied on prior EPA interpretations addressing when a pollutant is considered to be "regulated". The EAB ruled that the reasons cited by Region 8 for its decision were not sufficient. The EAB then sent the case back to Region 8 to 'reconsider whether or not to impose a CO2 BACT limit in light of the Agency's discretion to interpret, consistent with the CAA [Clean Air Act], what constitutes a "pollutant subject to regulation under the Act."' [Deseret decision at p. 63]. Recognizing the potential impact of its ruling and of Region 8's further consideration, the EAB observed that because the issue "has implications far beyond this individual permitting proceeding", Region 8 should decide whether it would be better to address the matter in "an action of nationwide scope". [Deseret decision, pp. 63-64].

 

            Clearly, then, the Sierra Club was denied the clear victory it sought; namely, to require BACT for carbon dioxide in all coal-fired power plant PSD permits. On the other hand, Deseret and other electric utilities seeking PSD permits are left hanging as to whether CO2 will be a regulated pollutant under the PSD program. Although EPA probably wants to resolve this case before the expiration of President Bush's term, as a practical matter, it simply cannot get it done in little more than a month. Thus, the incoming Administration must squarely confront an issue that could shape the climate change debate and, ultimately, energy policy in this country. EPA most likely will take the hint from the EAB and handle the matter through "an action of nationwide scope". How it turns out is anyone's guess, but it is fair to say that the new EPA will have more climate change hawks in policy positions than the current Agency.